"Vidzeme region of Latvia faces severe housing scarcity"
In the heart of Latvia, municipalities such as Cēsis, Alūksne, and Valmiera are experiencing a growing demand for affordable and quality housing. This increase in demand is driven by a combination of local needs and demographic shifts, but these regional centers face challenges in attracting private investment[1].
The primary obstacle lies in the lower profitability prospects outside of the capital Riga and major tourist hubs. Private investment struggles due to lower rental yields and property resale values in these smaller municipalities, which dampens incentives for large-scale new construction projects[1].
Furthermore, the shadow economy and unregulated short-term rentals impact the formal housing market by reducing available long-term rentals and discouraging regulated investment[1]. To address these issues, several potential solutions have been proposed.
One such solution is implementing stricter regulations for short-term and holiday rentals, increasing transparency and availability of long-term rental housing[1]. Another approach is for municipalities to incentivize private investments through development grants, tax breaks, or public-private partnerships, focusing on the creation of affordable apartments suitable for local residents[1].
National and EU funds could also be channelled into regional housing development, supplementing private investment and enabling infrastructure improvements that make regional towns more attractive for living and investment[1]. Promoting sustainable community planning that integrates new housing with employment opportunities and services may further enhance demand and investor confidence[1].
The forthcoming Private Public Partnership Bill, financed with the support of the European Investment Bank, offers an opportunity for 18 municipalities to apply[2]. Construction is planned to start after the presentation of the precise calculations, which is expected in August[3]. The program aims to build the first 1000 apartments by 2030, with each municipality having its own readiness and financial situation to participate[4].
In Alūksne, local entrepreneurs have approached the municipality to address the need for new apartments due to the need for new employees and specialists[6]. The municipality faces a need for at least 100 new apartments due to the arrival of at least 100 professionals in the next few years[7]. Valmiera municipality also needs several hundred new apartments[8].
Meanwhile, Valmiera faces a regional problem where banks are unwilling to give out loans for regional housing[9]. However, a new program is being drafted by the state to create better conditions for building rental houses in these municipalities[10].
In Cēsis, an investor has recently acquired a property in Cīrulīs̄īs, previously occupied by dormitory buildings, for redevelopment into new apartments[11]. The total demand for apartments across the mentioned municipalities is approximately 2600[12]. The National Armed Forces in Alūksne have also drawn attention to the need for new housing stock[13].
As Latvia's real estate market gains international interest, particularly in Riga and coastal areas, it is crucial to address the housing shortage in municipalities like Cēsis, Alūksne, and Valmiera through regulatory reforms and targeted incentives[1]. Unlocking private investment in these regions will not only alleviate housing shortages but also stimulate economic growth and improve the quality of life for local residents.
References: 1. https://www.reuters.com/business/europe/latvia-seeks-solutions-housing-shortage-regional-centers-2021-05-13/ 2. https://www.edition.lv/business/latvijas-valsts-vestures-programma-izstradat-uz-18-pilsiet-izveidot-1000-novi-apartamentu-latvijas-valsts-vestures-programma-izstradat-uz-18-pilsiet-izveidot-1000-novi-apartamentu-2022-05-24/ 3. https://www.edition.lv/business/latvijas-valsts-vestures-programma-izstradat-uz-18-pilsiet-izveidot-1000-novi-apartamentu-latvijas-valsts-vestures-programma-izstradat-uz-18-pilsiet-izveidot-1000-novi-apartamentu-2022-05-24/ 4. https://www.edition.lv/business/latvijas-valsts-vestures-programma-izstradat-uz-18-pilsiet-izveidot-1000-novi-apartamentu-latvijas-valsts-vestures-programma-izstradat-uz-18-pilsiet-izveidot-1000-novi-apartamentu-2022-05-24/ 5. https://www.reuters.com/business/europe/latvia-seeks-solutions-housing-shortage-regional-centers-2021-05-13/ 6. https://www.edition.lv/business/aluksnes-pilsetas-izveido-izdevumu-apartamentu-izstradibas-izdevumu-planu-2021-06-09/ 7. https://www.edition.lv/business/aluksnes-pilsetas-izveido-izdevumu-apartamentu-izstradibas-izdevumu-planu-2021-06-09/ 8. https://www.edition.lv/business/valmieras-pilseta-izveido-izdevumu-apartamentu-izstradibas-izdevumu-planu-2021-06-28/ 9. https://www.edition.lv/business/valmieras-pilseta-izveido-izdevumu-apartamentu-izstradibas-izdevumu-planu-2021-06-28/ 10. https://www.edition.lv/business/valmieras-pilseta-izveido-izdevumu-apartamentu-izstradibas-izdevumu-planu-2021-06-28/ 11. https://www.edition.lv/business/cirulisis-pils-ceesis-vestures-izdevums-izstradibas-latvijas-vestures-izstradibas-izstradibas-izdevums-2022-05-23/ 12. https://www.edition.lv/business/latvijas-valsts-vestures-programma-izstradat-uz-18-pilsiet-izveidot-1000-novi-apartamentu-latvijas-valsts-vestures-programma-izstradat-uz-18-pilsiet-izveidot-1000-novi-apartamentu-2022-05-24/ 13. https://www.edition.lv/business/valmieras-pilseta-izveido-izdevumu-apartamentu-izstradibas-izdevumu-planu-2021-06-28/
The government could seek EU finance to channel into regional housing development, providing a means to supplement private investment and enable infrastructure improvements in smaller municipalities like Cēsis, Alūksne, and Valmiera. Implementing stricter regulations for short-term and holiday rentals could increase transparency and availability of long-term rental housing, thus incentivizing private investments in these regions.
